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Alternate Collection Method - Tax & Trade Blog

International Trade Report

SPECIAL SALES TAX RULES FOR DIRECT SELLERS


Sales tax in Canada can be complex – especially in provinces that do not participate in the GST/HST harmonization system. This complexity becomes even more pronounced in industries that do not follow the typical retail model, like direct selling.  This blog explains how Canadian sales tax systems apply to the direct selling industry, and how special rules can help businesses streamline compliance.

Background

Under Canada’s standard sales tax rules, any person making taxable supplies over a certain threshold must register for GST/HST and provincial sales tax (where applicable), collect tax from customers, and remit it to tax authorities.  In a typical retail setup, the business itself tracks its revenue and ensures compliance.  But in a direct selling network, each participant may independently meet those thresholds.  Requiring every participant to track earnings, register, charge tax, and file returns would create a massive administrative burden and could discourage participation.

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The direct selling industry poses a number of unique challenges for Canadian sales tax regimes.  The patchwork of separate federal GST/HST and provincial PST/QST regimes only further complicate the matter, making it difficult for new entrants to the Canadian market to determine their collection, remittance, and reporting obligations.  This revised article from our 2023 primer provides a brief overview these optional sales tax rules.

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